Making an investment is basically a gamble, as this blog has said so countless times in articles of the topic. If you make the right decision on which form of investment to make, then you could hit it big and be financially independent for the rest of your life. However, it also comes with the risk of losing big if you make the wrong decision on your investment.
Investment, in other words, is something that you do indiscriminately especially with the money that you’ve worked hard for. There are ways, however, that you can get around the risks and ensure that you don’t lose that much when your investment inevitably goes downhill because of certain circumstances.
Make Sure You Invest Only Money You Can Afford to Lose
We’ve mentioned this before in our “Basics of Investing” article, but it deserves another mention here. Before you take out money to invest on something, make sure that the money you’ve put into the financial vehicle is an amount that you can afford to lose. If that money is your emergency fund, you should think twice or at least think about investing only a smaller amount. That’s because you have a lot to lose if you use that money for something that’s as risky as investing. If the investment fails, you lose money that you could otherwise have used for more important circumstances.
Research About Your Investment
It pays to make careful research on your investment. If you’re interested in the stock of a certain company, you might want to look at how it’s performing in the past. This is no assurance that the stock will indeed give you profits in the future, but research will help you determine if the stock is stable and is an ideal long term investment. Looking at the recent news stories about the company that issues the stock could also help, as you could identify whether or not the company has anything in store that can drive stock price upward.
Identify Entry and Exit Points
First, you should know when to make an entry. In stock investing, this means that you should know when to purchase a stock. This depends entirely on your risk appetite and your preferences, because each stock behaves differently from the other. However, the basic concepts are the same – you buy stock when the price has been consistently rising over a certain period of time from a sudden drop. This usually indicates a steady rise in price in the future, as interest in the stock is high.
Similarly, you should know when to exit your investment. This is especially true when you’re engaged in short term investment on a stock.When you’ve noticed that the price of the stock has risen consistently and has reached a certain percentage, you could sell off your investment at that point. Again, it would depend on your risk appetite. If a stock’s price has become too high compared to your initial investment, there’s a chance that it will drop considerably once other short-term investors like you have cashed in on their profits.
There’s also the legal aspect of investing. Make sure to consult a legal advisor, especially if you’re looking to make an investment in other nations like Thailand where the laws could be different from your home country.